The biggest thing in shopping

Louis Trager, OF THE EXAMINER STAFF

Published 4:00 am, Wednesday, November 8, 1995

1995-11-08 04:00:00 PDT UCTS;GE: OAKLAND -- THE BAY AREA gets its first view of the next wave of mega-merchants - a combination discount department store and huge, deep-discount supermar ket under one roof - when a Super Kmart Center opens Monday in Oakland.

Such "supercenters" are quickly becoming the most powerful new mass-merchandising format since the membership warehouses of the 1980s, retail analysts say.

Low rent and a non-union work force allow the Super K offer consumers one-stop shopping for tens of thousands of low-priced items. They also make supercenters run by Kmart and others the most serious competitive challenge that food stores and their heavily unionized work forces have ever faced.

Supercenters represent a throwback to the old general store, though on a grand scale.

They offer consumers one-stop shopping for everything from Spaghetti-Os to sweaters and fresh-baked cakes to auto supplies. They carry nearly 100,000 different items of food and general merchandise - tens of thousands more than traditional discount stores, supermarkets and warehouse clubs. Super Ks emphasize regular, retail-sized packages over the institutional packages that dominate warehouses like Price-Costco and Smart & Final.

"It's not uncommon to see carts full of food and also jeans and clothes and shoes, and also a basketball," says Kmart district manager Randy Colbus.

At 192,000 square feet - the size of a mall-anchoring department store - the Oakland Super K is almost double the footage of a modern standard Kmart.

The store has an imposing row of 34 checkout stands. It strives for an upscale look, with wide aisles and shades of blue, gray and white.

Unlike most warehouse supermarkets, such as Pak 'N Save and FoodsCo, supercenters house a whole strip-center's worth of shops.

The push for supercenters stems from a hunger for sales growth by chains that have nearly saturated the country with discount department stores.

The average Kmart takes in $145 per square foot in annual sales, says Douglas Tigert, a Maine professor who researches the discounting industry.

A supercenter promises more business because customers shop much more often for food than for general merchandise. When they show up to grocery-shop, they can be tempted to buy other goods as well.

But the big store also poses a risk, because it must generate a hefty $375 per square foot in sales to pull its weight, Tigert says. That indicates a target of $72 million in annual sales for the Oakland Super K.

The supercenter is plunging right into the heart of the Bay Area with the debut Monday of the 24-hour Super K in a former industrial site off I-880. The store sits between the Fruitvale District and the city of Alameda.

The site presents an intriguing mix of pluses and minuses.

The store is readily accessible from the freeway and can draw on a big population base of 440,000 within five miles.

Fruitvale is one of the few districts of Oakland whose population continues to grow. The trade area is not upscale, but it's not destitute, so it could work well for a Kmart store.

The area is not well served by chain retailers. That goes double for food stores on the Oakland side, although there are Lucky's supermarkets and a Smart & Final warehouse store nearby and a Pak 'N Save warehouse grocery not far away.

The down side to the Super K location is that it's in an industrial area without other retail or homes in the immediate vicinity. The site will likely scare some potential customers away from shopping there, especially at night.

"We have hired and will keep on site 24-hour security patrolling the parking lot," promises store manager Terry Burnell. "We have doubled the lighting around the lot. We obviously have our own in-house security, which will be highly visible. And internal and external cameras."

Other developers believe in the neighborhood, too. The 160,000-square-foot Del Monte Cannery Shopping Center is set to open at Fruitvale Ave. and 880 in the second half of 1996. It will have a Lucky supermarket, Office Depot, MacFrugal's Bargain Closeouts, Pep Boys' Parts USA, Country Harvest Buffet, Taco Bell and other retailers.

Right from the start, the Super K should take tens of millions of dollars out of an Oakland-Alameda retail food business of about $450 million per year, if industry patterns hold.

The problem that supercenters pose for food stores can't be overstated, Tigert says.

"It is the next major move, and the size of the threat is three times what it was from warehouse clubs," he says.

In markets that have all the supercenters they are likely to get, they grab about 20 percent share of total food sales, compared with about 7 percent that clubs like Price-Costco took, Tigert says.

Supercenters were at the heart of concessions sought by Bay Area chains, sparking last spring's supermarket strike. The Super K will employ about 1,000 people, but only 300 will be full-time, with benefits such as health coverage.

President Richard Benson says his 6,000-member UFCW local 870 based in Hayward is following up on inquiries from Oakland Super K employees about organizing the store. The company describes itself as pro-employee and says its workers don't need unions.

Efforts to put a Super K in Milpitas were turned down by city authorities, and a bid in Livermore was withdrawn, in the face of opposition from the United Food & Commercial Workers union and others.

Tigert says that when supercenters enter new markets, the established supermarkets reduce their prices to compete. But in the long run, supermarkets must become unbeatable on the quality of perishables, cleanliness and service in order to compete profitably, he says.

The number of food stores in Oakland and Alameda has already dropped to 491 in 1994 from 520 in 1990, according to the state Board of Equalization.

Now Playing:

The Oakland Super K is just the latest of 87 supercenters that troubled owner Kmart Corp. intends to have open by the end of the year. It plans more of the sprawling stores for Northern California next year, including one in San Jose.

Industry leader Wal-Mart has 231 supercenters. It will open a massive 110 more next year, but none will be in California.&lt;

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